Maersk Line's back in black in 2012

Friday, February 22, 2013

Assisted by improved results from its container shipping subsidiary Maersk Line, the A.P. Moller-Maersk Group reported improved profit in the fourth quarter and for the whole year 2012 when compared to 2011.
Reporting results in U.S. dollars, the Danish conglomerate said it had a profit of $965 million in the fourth quarter, compared to $273 million in the same 2011 period. Revenue was slightly lower at $14.7 billion in the fourth quarter 2012, compared to $15 billion in the fourth quarter 2011.
For the full year, the company had a profit of $4 billion in 2012, compared to $3.4 billion in 2011. Revenue in 2012 was $59 billion, compared to $60.2 billion in 2011.
A.P. Moller-Maersk is a diversified company, standing on what Chief Executive Officer Nils Andersen calls “four strong legs”—Maersk Lines, APM Terminals, the oil company Maersk Oil, and Maersk Drilling, an operator of drilling rigs. Maersk also has diverse interests in other businesses, such as the forwarding company Damco and the Netto supermarket group.
Here is how several of its shipping-related subsidiaries did last year:

Maersk Line. The container liner company had a profit (net operating profit after tax) of $335 million in the fourth quarter, compared to a loss of $593 million in the same 2011 period.
Revenue in the fourth quarter was $6.5 billion, compared to $6.4 billion in the same period a year earlier.
For the full year 2012, Maersk Line’s profit was $461 million, compared to a loss of $553 million in 2011. Revenue in 2012 was $27.1 billion, compared to $25.1 billion in 2011.
Maersk Line said it expects higher profit in 2013, based primarily on further unit cost reductions, and also improvements in refrigerated container rates. It expects global demand for ocean containers to increase by 4 percent to 5 percent in 2013, compared to the 5 percent increase it saw in 2012.
Speaking Friday to securities analysts as the group released its annual report, Andersen said the company does not expect a major change in westbound volumes from Asia to Europe in 2013, but “we do expect opportunities in the U.S. trade” and increasing imports into emerging economies.
Maersk said it reduced bunker consumption per container by 11 percent and reduced its headquarters headcount significantly. He said the company could futher reduce bunker costs, headcount, and achieve savings by renegotiating with suppliers. He added the company reduced costs by $50 per container in 2012.
Andersen said most of the bunker savings came from slow-steaming, but he noted “you can’t pursue this forever, because sooner or later the customers would like to have decent service. But as long as bunkers prices are where they are, this is clearly a good way to reduce costs.”
Maersk Line said it “turned profit-making as unit costs were reduced and volume grew,” and “restored market rate levels through general rate increases backed by capacity withdraw.”
Maersk moved 8.5 million 40-foot equivalent units (FEUs) in 2012, compared to 8.1 million FEUs in 2011, but it said volumes were lower in the fourth quarter of 2012—2 million FEUs, or 200,000 fewer FEUs than in the same 2011 period.
Andersen said that decline was partly due to the company's higher share in Asia-Europe trade lane, which he explained has had the least positive development.
He said the company has given up some market share in the second half of the year as it tried "to lead the market up in prices, and we will try to rectify that."
Maersk has a goal to have an EBIT (earnings before interest and taxes) margin that is 5 percent better than its peers.
Andersen said in 2012 Maersk improved the difference between it and its peers from 0.5 percent better at the beginning of the year to 2.5 percent to 3 percent in the past two quarters.
"I'm optimistic we can get further and in that process try to close the gap with CMA CGM," he said.
Rates averaged $2,881 per FEU in 2012, $53 per FEU higher than in 2011. In the fourth quarter rates were $2,846 per FEU, $175 per FEU higher than they were in the fourth quarter of 2011.
The company said its unit cost decreased 3.3 percent in 2012 when compared with 2011, and Andersen said “continuing improvement on unit cost is essential to achieving progress in Maersk Line.”
In 2012, Maersk Line’s total fleet capacity increased by 4 percent to 2.6 million TEUs. The company said capacity growth in owned fleet was partly offset by redelivery of time-charter vessels.
At year end, Maersk Line’s fleet consisted of 270 owned vessels, compared to 254 at the beginning of the year and the number of chartered vessels dropped from 391 to 326.
The increase in owned ships came as 17 new vessels with aggregate capacity of 100,000 TEUs were delivered. The vessels are designed for the Africa and Latin America trades, which the company said are two of its key growth markets. It said in addition to reducing slot cost and emissions of greenhouse gasses, the new ships are attractive due to their substantial reefer capacity.
Maersk will take delivery of the first four ships in its series of 18,000-TEU “Triple E” containerships in the second half of this year. The company said these vessels, which will be the world’s largest containerships, will be “phased into the Asia-Europe market with respect for the market balance.”
Andersen noted the Triple E ships will be able to move containers with half as much fuel as was required two to three years ago on ships plying the trade lane.
“This is very, very significant, but the numbers are relatively small and it is not going to be a huge impact in the coming years,” he said.
Andersen said the company is also working to improve fuel efficiency by changing hull shapes, giving vessels entering the shipyards an “eco-refit” that can reduce bunker consumption by 8-10 percent.
He said the company can reduce capacity by either returning chartered ships to their owners, which he said is the preferred route, or scrapping vessels, which the company may do if it establishes owned ships are no longer competitive because they are old-fashioned or not competitive in fuel costs.
The company said its general rate increase on reefer containers, which went into effect Jan. 1, has been largely accepted. It said it carried about 800,000 FEUs of reefers in 2012.
Andersen declined to give a general rate forecast, saying “we have learned through bitter experience that does not make any sense.” He said the company hopes that general rate increases it has announced for 2013 are accepted.
“The profitability level of the industry remains very low. When you see the levels that are coming out from our competitors in 2012, you will see that most of the lines did not make any money and our return was below our cost of capital,” he said. “We need to get better rates before this is a good business.”

APM Terminals. APM Terminals (APMT) had a profit of $168 million in the fourth quarter of 2012, a decline from the $172 million in the same 2011 period. Revenues were relatively flat - $1.2 billion in the fourth quarter compared to $1.3 billion a year earlier.
APMT had a profit of $723 billion in 2012, 12 percent more than the $648 million earned in 2013. Revenue was $4.78 billion in 2012, compared to $4.68 billion in 2011.
The company had throughput of 35.4 million TEUs at its terminals in 2012, an increase of 6 percent. It said this was better than the 4 percent growth experienced by the industry overall.
APMT said it expanded and optimized its portfolio through acquisition of a 37.5-percent stake in Global Ports, which has terminals in Russia and the Baltics, and a 50-percent stake in an inland depot in Mombasa, Kenya.
The company took over terminal operations in Gothenburg, Sweden, and opened a terminal in Wilhelmshaven, Germany, where it has a 30-percent stake. It also secured new projects in LazaroCardenas, Mexico, and Ningbo, China.
Last year, APMT divested itself of Maersk Equipment Service, USA, a company that maintains and repairs equipment, realizing an after tax profit of $46 million. The company also sold a 25-percent stake of a terminal in Xiamen, China.
The company improved crane lifts per hour by 7 percent across its portfolio and said it has plans to improve productivity by 15 percent over five years.
APMT noted its operations in the Middle East, including its terminal adjacent to the Suez Canal, were affected by political unrest. Operations in New York were also affected by Hurricane Sandy.

Damco. Damco made a profit of $55 million in 2012, compared to $ 63 million in 2012. Revenue was $3.3 billion in 2012, compared to $2.8 billion in 2011.
The forwarding company significantly increased its service offerings within the air freight market through the acquisition in August 2011 of the China-based forwarder NTS International Transport Services. In October 2012, Damco acquired the forwarder Pacific Network Global Logistics, strengthening its position in Oceania.
Damco shipped 6 percent more in ocean freight volumes, compared to 2011, and air freight tonnage almost doubled, recording a growth over last year of 91 percent in part because of the full-year effect of its NTS acquisition.
Damco said supply chain management volumes returned to growth and ended 5 percent higher than prior year's level.
Damco explained worsening market conditions, as well as implementation costs related to new business, caused downward pressure on its unit margin profitability, which had a negative impact on its 2012 performance. - Chris Dupin